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Tuesday, August 22, 2006

Bass Pro Shops Leads Demands For Public Subsidies For Retailers

Some people are suggesting that it’s time for Memphis and Shelby County Governments to tell Bass Pro Shops to fish or cut bait with its announced plans to put a massive store in The Pyramid.

The truth of the matter is that we really don’t have much leverage to be making any demands. It’s not as if there’s a bunch of folks lining up to fight over the building.

And city and county seem resigned to a lengthy negotiation process. Already, they have set November 5 as the day they shutter the 15-year-old building, once hailed as Memphis’ national signature.

Early this year, it was announced with fanfare that the big-box retail mega-store would convert The Pyramid into a new species of store – the kind that is more tourist attraction than retail outlet. But the months since that announcement have brought little except updates that take on the character of State Department briefings: continuing discussions, substantive talks and meaningful agreement.

No Demands

As a result, Memphis CFO Robert Lipscomb is planning to sit down with a company rep on Monday to see if he can get any more definitive answers about whether the progress is a go. There’s really not much to be gained from his pounding the table and setting deadlines. Bass Pro Shops is experienced in moving at its own pace and negotiating until it has wrung as many concessions out of the public sector as possible.

In that regard, we should be closely watching Buffalo, New York. We’ve written previously about the grand plans announced there to convert Buffalo’s downtown auditorium into another permutation of the fishing and hunting mega-store planned for Memphis, and yet, almost two years after New York Governor George Pataki announced the state’s contribution of $20 million to spur on Buffalo’s downtown redevelopment, the project languishes, much to the chagrin of elected officials, who are taking increased heat from their constituents.

It feels pretty familiar. Citizens of Buffalo are up in arms, first, because of the large incentive package of $70 million to get the giant-sized fishing store, but second, because even with those incentives, they feel that their city is being jerked around. As recently as August 4, an environmental assessment of the old Memorial Stadium was made as part of the process for the Bass Pro Shop, but no contract has ever been signed.

Progress On A Small Scale

In Buffalo, it’s now watched with a cynical eye, as suggested by a sarcastic report by a citizens’ group, which said that a television reporter “says it’s very really, infintestimally close to being finalized.” At least in Buffalo the proposed location for the mega-store is a 70-year-old building. Here’s it’s one opened with such fanfare as the “final piece in the downtown puzzle” and shut down unceremoniously when the FedExForum was inaugurated.

As we’ve said previously, perhaps these fishing mega-stores are this decade’s equivalent of the aquariums built in too many downtowns as the panaceas for their economic downturn. The hunting and fishing store seems the latest manifestation of the tendency for cities to chase a magic bullet or a quick fix as the answer to rejuvenating downtowns.

If it makes us feel any better, Memphis isn’t the only city being reeled in. Actually, if Mr. Lipscomb can get Memphis and Shelby County off with just providing a public building (and with some hope of ever being paid rent to offset debt service), he will have done well. Other cities are ponying up taxfree bonds, tax increment financing, direct grants, infrastructure improvements and state aid packages.

It defies logic, but from Pennsylvania’s $25 million in aid to the about $24 million coughed up by Broken Arrow, Oklahoma; Wichita, Kansas, and Garland, Texas, city after city is lining up to bribe the retailer to come to their market. That said, no one comes close to trumping the city and state incentives of $80 million in Buffalo.

Oh, No, Not Economic Impact Studies

The announcements about these giant retailers are announced with fanfare by governors and mayors who cite economic impact studies about as rooted in reality as those used for professional sports. One such announcement suggested that four million visitors would come to a store in Buda, Texas, (between San Antonio and Austin), which agreed to provide $40 million in bonds and $21 million from state government in the form of highway improvements.

In a moment of unusual candor, an official of Cabela’s, #2 to Bass Pro Shop’s #1, said that the company is most adept at wringing concession out of smaller cities anxious for answers to reignite their economies. One of these tactics may be playing out here, because once the announcement is made, the greatest pressure to cut a deal is on the public sector, not on the retailer, because elected officials don’t want to look like they failed, particularly when the symbol of that failure is 320 feet tall on the riverfront.

If there has ever been a poster child for corporate welfare, it should be the public incentives given in so many places to retailers and retail developments. And once more, it’s another supposed economic development strategy that does nothing to create the high-skill, high value-added jobs that every city is competing for.

Take A Gander

Unfortunately, there aren’t enough companies like Gander Mountain, #3 fishing and hunting retailer. It has taken a stand opposing taxpayer subsidies, saying they are “anti-competitive and fundamentally inappropriate.” It’s pretty hard to argue with that logic, and in support of it, Gander Mountain has launched a national campaign against government subsidies for retail companies.

Meanwhile, Bass Pro Shops and Cabela’s continue to wring public subsidies out of cities on the basis that they are not retail stores, but “destinations.” Whether they are a retail novelty that will fade in the coming years remains to be seen. But whether they are or not, it’s next to impossible to imagine a situation where its true economic impact in Memphis and elsewhere will ever be known.